Lagos – The sector might have recorded a decline over the past year but Nigeria has remained one of the busiest and most attractive mergers and acquisitions (M&A) markets in Africa during the period.
This is according to a new research which attributes the attraction to Nigeria’s rich natural resources, large population and favourable demographics.
The M & A sector defied currency volatility and a period of uncertainty leading up to the last presidential election.
According to the Deal Drivers Africa, published by Mergermarket, in collaboration with FBNQuest, Merrill Corporation and Control Risks, in 2015, Nigeria delivered a year of steady deal flow in 2015 with 25 deals worth US$3,2 billion.
Deal activity was down 22 percent from 2014, which saw 32 deals worth US$9,5 billion.
However, investor confidence in the Nigerian M&A market was strengthened by the conclusion of a presidential election in March, which had been postponed in early February.
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Nonetheless, this coincided with a weakening oil price – oil accounts for approximately 70 percent of government revenue – and related currency volatility that resulted in the Naira dropping to more than N200 to the US dollar at official exchange rates.
Afolabi Olorode, Head of Financial Advisory and Equity Capital Markets at FBNQuest, says the country’s size, population and consumer trends make it more resilient to these challenges.
“The sheer size of Nigeria’s population and GDP makes it an attractive market compared with every other country in Africa. It is the biggest economy in Africa but most sectors are still underserved, which means there is massive growth potential,” said Olorode.
Olorade noted Nigeria had been facing some challenges with exchange rates and calls for devaluation.
“So we’re probably not as competitive when it comes to outbound deals. But we feel that there is still a lot of work to do here. The domestic market is underserved as it is, so there is no need to go out and start exploring the region or the continent.”
- CAJ News